Grow Your Margin Before You Grow Your Revenue

When people talk about business growth, the conversation often centers around increasing revenue. But revenue is only part of the equation. The most meaningful growth is profit growth.

Aaron Thomas

7/15/20251 min read

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Profit Growth

It’s entirely possible to grow profit without growing revenue. The key is to focus on gross margin, which is the difference between revenue and the direct costs (labor and materials) that are required to produce that revenue. Gross margin is a measure of operational efficiency and the higher it is, the more profitable your business becomes. If your gross margin isn’t strong, your profit won’t be either.

How to Improve Gross Margin

Increase Labor Efficiency
Every 24 minutes of improved productivity in an 8-hour day adds approximately 5% back to your margin. Set clear production goals and ensure your team understands the budget for each project.
Reduce Material Costs
Take advantage of bulk purchasing discounts, negotiation with suppliers, and early payment discounts to lower input costs.
Set Firm Margin Expectations for Sales
Your sales team should never discount below your target margin. Establish clear pricing guidelines and enforce them.
Incentivize Margin Performance
Reward teams when gross margin exceeds expectations. This aligns everyone with the goal of profitability.
Measure Gross Margin on Every Sale
Tracking margin at the transaction level helps you catch issues early and prevent erosion over time.

Why It Matters

Margin erosion is one of the fastest ways a profitable company can become unprofitable. By setting clear gross margin standards, measuring them consistently, and holding teams accountable, you build a foundation for sustainable, profitable growth.

Grow smart. Focus on margin first.